Interest wanes in direct action policy

Australian industry is losing interest in the federal government's Emissions Reduction Fund.

The second-last auction under the fund saw 47 contracts awarded, down from 73 at the previous auction, and $367 million committed compared with $516 million last time.

The Clean Energy Regulator contracted 34.4 million tonnes of carbon credit units, down from 50 million tonnes at the third emissions reduction fund auction.

Land use and waste projects made up 86 per cent of all funding.

Market analyst RepuTex director Hugh Grossman said it showed companies were losing interest in the ERF, also known as the "direct action" plan.

"The administrati ve complexity of the scheme, the diminishing budget and the low price of carbon have dampened interest in the ERF. This is unlikely to change until compliance obligations are placed on industry to offset their emissions" Mr Grossman said.

The CER said the abatement had been achieved at an average price per tonne of $10.69, below the average to date of $11.83.

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The final ERF auction is expected to be held in April 2017, with $440 million remaining in the government's initial $2.55 billion funding pool.

The government is planning a major review of climate policy in 2017.

Despite the direct action policy, national emissions are expected to rise from 534 million tonnes in 2015 to 577 by 2020 - three per cent above 2000 levels, and well short of the government's target of a five per cent reduction.

However, the government plans to meet its target by using about 130 million tonnes in credits for Australia's performance under the Kyoto protocol between 2008 and 2012.